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Kicking Keynes a Well Liked Sport
May 20, 2010

British economist John Maynard Keynes is a favorite target of the hard money crowd. He famously called gold a "barbarous relic" and it is a term that caught fire and lived far beyond the immediate conditions in which it was uttered.

The beauty of the term is it means different things to different people. Individuals who viewed it as an obstacle to the advancement of economics and central banking were electrified by it. To those who supported the gold standard, it was patently ridiculous.

Keynes was trying to prevent Britain from going back on the gold standard in 1925. He argued that Britain had too much debt, its labor costs were too high at the proposed $4.86 exchange rate and it constrained the Treasury from engaging in demand management that might get the country out of its prolonged post-World War I slump.

Keynes lost the political argument, but won over the younger generation and was the founder of an important school of economics.

His opponents, who feared inflation, and had just lived through the inflation of World War I, wanted gold as an anchor. Keynes saw it as a millstone.

With gold at record highs nowadays and fears of inflation once again riding high, the battle is being engaged and gold and Keynes' ideas are once again front and center.

Just as in 1920s Britain, it can be argued that America has too much debt, its labor costs are too high relative to other countries, especially in Asia, and that the U.S. Treasury attempt at demand management is inflationary.

Who will win this time?

The numismatic memento of all this is the 1925 British gold sovereign, or one-pound coin. It was struck after a production gap of eight years and is the symbol of Britain's return to gold. It also turned out to be the last circulating gold coin ever struck by Britain under the gold standard, which was abandoned in 1931 once and for all in the terrible deflation of the Great Depression.

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About the Author
David C. Harper has been a coin collector since 1963. He joined the Krause Publications editorial staff in 1978 and is currently editor of Numismatic News and World Coin News. He also edits two books annually, North American Coins & Prices and Coin Digest. He is the author of the Class of '63 column that runs each week in Numismatic News. His first bylined numismatic article appeared in the June 1971 issue of Coins Magazine and his various Krause Publications assignments included a stint as editor of the magazine 1980-1983. Harper received a bachelor of science degree from the University of Wisconsin-Oshkosh in 1977. He had a double major of journalism and economics.

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